Secured Definition

In finances, a loan is said to be secured if it is legally tied to an asset by a lien specifying the asset as collateral in the case of loan repayment default. For example, you might take out a $25,000 loan from a financial institution and use your automobile title as collateral; if you subsequently default on loan repayment, the financial institution is legally entitled to seize and liquidate your automobile to satisfy some or all of the outstanding debt. Because a secured loan carries less risk for the lender, they are offered at a lower interest rate than an unsecured loan.